Vietnam must link green finance with the carbon market to promote ongoing trends and realize its commitments to sustainable development.

On August 6, Minister of Industry and Trade Nguyen Hong Dien signed and issued
Decision No. 2259/QD-BCT on the promulgation of a plan to develop a government decree
regulating policies on the import and export of goods, the distribution of goods
and services, commodity trading floors, and the operations of commodity exchanges
in Vietnam’s international financial center.

For the green finance trading floor, the draft proposes stipulating that the
listing and trading of green financial products be limited to those meeting environmental
standards and criteria prescribed by the Ministry of Finance and the Ministry of
Agriculture and Environment (MAE), referenced to international practices and standards.
Meanwhile, the carbon credit trading floor will facilitate the trading of credits
in accordance with international standards. This requires a transparent measurement
– reporting – verification (MRV) mechanism, valid certification from competent authorities,
and compliance with regulations on storage, information disclosure, and fraud prevention
in carbon trading.

According to experts, developing a green finance market in conjunction with
a carbon credit market can effectively mobilize capital for emissions reduction
projects, representing a financial mechanism that contributes to mitigating the
impacts of climate change and addressing environmental challenges.

Initial efforts

From August 1, Decree No. 119/2025/ND-CP dated June 9, 2025, from the government
amending and supplementing a number of articles in Decree No. 06/2022/ND-CP on greenhouse
gas emission reduction and ozone layer protection, officially took effect.

Regarding carbon market regulations, the Decree stipulates that by the end
of 2028, Vietnam will have established a National Registration System; built and
piloted a domestic carbon trading floor; implemented mechanisms for exchanging and
offsetting domestic carbon credits; and carried out activities to enhance capacity
and raise awareness about developing a carbon market.

From 2029, it will develop and implement a mechanism for auctioning greenhouse
gas emission quotas; complete regulations on carbon credit management and the exchange
of emissions quotas and credits; and finalize the legal framework for organizing,
managing, and operating the domestic carbon market as well as participating in the
global carbon market.

The establishment of a carbon market is expected to create new financial flows
for activities aimed at reducing greenhouse gas emissions, promoting Vietnam’s green
transformation, and developing low-emission technologies. This will contribute to
building a low-carbon economy and proactively responding to climate change, with
the ultimate goal of achieving net-zero emissions by 2050, as committed to at
COP26 in late 2021.

According to Associate Professor Nguyen Dinh Tho, Deputy Director of the Institute
for Strategy and Policy on Agriculture and Environment at the MAE, Vietnam is building
robust carbon market infrastructure in various stages to ensure accountability over
emissions. Emissions quotas are being set, and businesses will eventually face compliance
costs if they exceed allowable limits. A pilot carbon credit trading platform will
pave the way for full implementation.

In parallel, legal provisions are being drafted to oversee credit transfer
rules, including participation in international markets. Major emitters must begin
compiling inventories in accordance with regulations under Decree No. 06. Environmental
protection targets, meanwhile, are being translated into national action plans that
prioritize infrastructure resilience, water efficiency, and ecosystem restoration.

Deputy Prime Minister Tran Hong Ha signed Decision No. 21/2025/QD-TTg on July
4, stipulating environmental criteria and procedures for confirming investment projects
in the green classification list. This decision, Associate Professor Tho believes,
marks an important milestone in Vietnam’s green finance roadmap, helping define
the boundary between projects with genuine environmental benefits and those that
do not safeguard, or even harm, the environment. “Establishing mandatory environmental
criteria is a strategic step to screen projects, ensuring that only truly green
activities are certified and enjoy policy incentives,” he said. “This legal framework
supports domestic programs and facilitates Vietnam’s access to international climate
finance resources, carbon credit mechanisms, and public-private partnerships in
sustainable development.”

In Vietnam, banks are increasingly mobilizing the necessary capital, particularly
low-cost funding for green loans, with major institutions such as BIDV, Vietcombank,
and Agribank taking the lead. Credit institutions are also proactively seeking partnerships
with international organizations to implement green credit programs. Examples include
the Renewable Energy Development Project (REDP) and the Vietnam-Energy Efficiency
for Industrial Enterprises Project (VEEIE), funded by the World Bank, as well as
renewable energy projects supported by loans from the Japan Bank for International
Cooperation (JBIC).

At the same time, regulators are building a support framework that includes
financial instruments, investment incentives, and institutional guidance to channel
capital into climate-friendly projects. According to experts, the development of
green credit mechanisms, expanded access to concessional loans, and a stronger domestic
green bond market demonstrate Vietnam’s commitment to creating a financial environment
where environmental and economic benefits align. Institutions are exploring models
that allow for flexible credit risk management and interest rate advantages for
projects that align with national climate goals.

Strengthening connections

Experts have said that if green credit provides capital for projects certified
with carbon credits, then carbon credits also present an opportunity to export goods
to other countries.

Associate Professor Tho noted that in the agriculture sector, sustainable aquaculture
stands out for its high export potential but also carries significant environmental
risk. Unsustainable practices in feed use, mangrove deforestation, and untreated
wastewater pose serious ecological threats.

Green bonds can finance projects that convert operations to closed-loop systems
that recycle water, introduce sustainable alternative materials such as insect protein,
and fund mangrove restoration efforts capable of generating green carbon credits.
For perennial crops such as coffee and pepper, both important exports for Vietnam,
green bonds can enable agro-forestry models, water-saving irrigation, and precision
inputs to reduce land degradation.

Vietnam’s forests also require urgent financing to conserve biodiversity and
store carbon. Green bonds can support sustainable forest management projects to
prevent deforestation and promote reforestation in degraded areas.

The Associate Professor added that while funding committed under the Just Energy
Transition Partnership (JETP) provides a valuable foundation for Vietnam’s emissions
reduction goals, it covers only a small portion of the estimated $360 billion needed
to achieve net-zero emissions by mid-century. “Establishing a clear green taxonomy
would help investors and lenders identify eligible projects aligned with sustainable
development goals,” he suggested. “Once the carbon market is fully operational,
which is expected by 2029, it will create incentives for low-carbon initiatives
and emissions reductions.”

According to Dr. Luong Quang Huy, Head of the Greenhouse Gas Emission Reduction
and Ozone Layer Protection Division within the Department of Climate Change at
the MAE, developed countries are at the forefront of establishing both voluntary
and compliance carbon markets, often closely linked to green finance mechanisms.

In the US, the Regional Greenhouse Gas Initiative (RGGI) demonstrates the benefits
of linking regional carbon markets, with clear positive impacts on renewable energy.
Since its inception, the RGGI has helped reduce CO₂ emissions from the electricity
sector in participating states by more than 50 per cent, while boosting investment
in renewable energy and energy efficiency.

Elsewhere, Australia also has experience with compliance carbon markets – the
Emissions Reduction Fund and Safeguard Mechanism – alongside green financing initiatives.
In China, the national emissions trading market has expanded rapidly, supported
by fiscal policies that promote investment in green finance markets. And in ASEAN,
progress is being made through the launch of sustainability-linked bond standards
and the ASEAN Sustainable Finance Taxonomy. Among member states, Singapore has introduced
a carbon tax that allows companies to meet part of their tax obligations through
the purchase of third party-certified carbon credits.

Vietnam can draw many important lessons from international experience, Dr.
Huy said. “This includes prioritizing the establishment of a strong legal framework
for both green finance and a carbon market; ensuring the quality and additionality
of carbon credits through a complete and unified MRV system; maintaining independent
appraisal to avoid the pitfalls of some voluntary carbon markets; and actively attracting
the financial sector by offering incentives and building capacity to channel green
capital flows into emissions reduction projects,” he explained.

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VET-Ngoc ;Lan